Friday Free For All
It’s time for our regular open topic Friday Free-for-all post here on VancouverCondo.info!
- But why are they really selling?
- Vancouver sales slow to 2001 levels
- Keep building stuff and they’ll keep coming
- Canadian prices (except Edmonton) rising
- 40 years terms add fuel to the fire
- TD Chief Executive gets all gloomy
- AAA rating not what it used to be
- Bernanke: Housing crash not Feds problem
- An eye out for mortgage fraud
So what are you seeing out there? Post your news, links, and anecdotes here and have a great weekend!
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April 8th, 2008 at 5:23 pm
This applies to this thread much more (pasted from Odlum Browns market report):
When a particular asset class delivers outstand-
ing returns over an extended period, investors
become convinced that there are solid funda-
mental reasons for the trend. Theories are
developed to justify participation and disregard
valuation considerations. In the early ’70s, the
“Nifty Fifty” stocks like Polaroid and Xerox were
going to make money forever. At the beginning
of the decade, the Internet was going to render
traditional industries irrelevant. Today, growth
in China and India is expected to translate into
a permanent shortage of commodities.
Remember when people said tech stock could never lose money because the internet was never going away?
Also
During the technology mania, valuation consider-
ations were dismissed due to fear of missing out
and underperforming “hot” investment man-
agers committed to the new era
April 8th, 2008 at 4:24 pm
Instead of arguing with guys like Rob A and Krrish we should really be encouraging them to buy up as much RE as they can. It truly is to our advantage to encourage these people to continue to inflate the balloon. The higher it rises the harder it will fall – we will benefit from a steeper correction.
April 8th, 2008 at 4:04 pm
This Rob A. guy must be joking with us. It has to be sarcasim …. people aren’t that dumb to post:
“I was having cocktails at Opus Bar and I told my friends about this blog. We all had a good laugh”
Please leave me with a little more hope in the human race …..
April 7th, 2008 at 8:54 pm
I don’t have the link, but if you go to the CMHC site and download the free publication Canadian Housing Observer 2007 there is an explanation of how sub prime and near prime mortgages work in Canada.
April 7th, 2008 at 3:58 pm
“I think your idealism is great but it’s just unrealistic, the CMHC has shown ever intent to help the banks out of the housing jam while screwing over common folk, why would they change?”
I agree it’s within the government’s mandate to tell CMHC how to spend money. I personally think what will happen is the crap will hit the fan and CMHC’s first reaction will be to sieze payments wherever possible to preserve their balance sheet — they are viewed as successful in their owners’ eyes if they don’t cost anything. The banks will fight tooth and nail, pull strings in the government and eventually CMHC could start flood the lenders with government money. But this will not happen overnight and could take many months before anything happens. The fear is, by the time lenders realise CMHC is relaxing its payments, lenders will have already clammed up.
Maybe we’re both cynical for different reasons. My view is CMHC is a business. My cynisism rises from the idea that the government’s bailout will be a window-dress at best, not actually spending much money in the process. I use the example of the recent US bailout package that few could actually access as what could happen in Canada.
I still think it’s silly to think lenders will continue to lend to those who are at a high risk of foreclosure in the face of falling prices unless CMHC also covers their foreclosure and administrative costs too.
April 7th, 2008 at 3:16 pm
“if CMHC wants to, they can nickel and dime each payout and delay payment in the process”
I don’t think you understand the political relationship banks have in high places. If that were to happen (not likely) the banks would lean on the government and the government would lean on the CMHC to loosen the purse strings.
I think your idealism is great but it’s just unrealistic, the CMHC has shown ever intent to help the banks out of the housing jam while screwing over common folk, why would they change?
April 7th, 2008 at 1:12 pm
“Banks are large institutions with ways of twisting arms that your average home owner “
Having worked at a large company I can say that individual claims are rarely pooled. Each loan is different and there will always be enough exceptional cases to warrant more than just filling a checkbox on a computer screen. My point is that, if CMHC wants to, they can nickel and dime each payout and delay payment in the process, the sole purpose being to shore up their balance sheet.
“if the average person with a high risk loan pays only one year the bank has still made money on the deal, even if it’s not quite as much money as they’d like.”
This is true however the foreclosure process is not free. It costs many thousands of dollars, likely pretty close to and likely more than the spread that the bank gets on this loan for a 5 year term. Remember the bank does not pocket the full interest rate but the spread compared to an MBS or whatever other vehicle they are using for financing. To compensate for higher expected foreclosures the bank’s spread will increase, even with CMHC insurance. It is a vicious circle if MBSs require higher rates too.
April 7th, 2008 at 12:15 pm
Jesse
I disagree with point # 2
The CMHC has acted very poorly up until now, they likely will never prove any wrongdoing on the side of the banks in cases of mortgage fraud so they’ll get the money. Banks are large institutions with ways of twisting arms that your average home owner with an insurance claim cannot match, the CMHC will be prompt in their repayments. Your first few years of paying off a 40 year mortgage is almost all interest, which is money that goes straight to the bank, so if the average person with a high risk loan pays only one year the bank has still made money on the deal, even if it’s not quite as much money as they’d like.
April 7th, 2008 at 10:02 am
“our 5% is a much bigger deal than US’ 8.64%. And besides, you can’t walk away from a Canadian mortgage than you could with some American mortgages, which could compound the situation even worse.”
There are arguments for Canada’s situation being better AND worse than the US. IMO “subprime” is merely a symptom and we will see plenty of “prime” issues as well. The subprime stuff was just the first in line to hit the fan. Canada has subprime and lots more prime. There will be fallout but it may not be as explosive as the US.
It’s silly to think that CMHC MI is going to save the market. MI is merely a stop against outright default but BANKS LOSE MONEY WHEN THEY INVOKE CMHC POLICIES. I love the logic:
1) CMHC underwrites loans
2) Therefore I can issue loans to anyone without any risk
Wrong. Banks need to make money on loans. CMHC may prevent them from writing off billions but I would be surprised if, when under pressure to shore up balance sheets, they keep lending to those they are certain will default. Also I have said before that getting money out of an insurer is often more difficult than it looks, especially if there is any inkling of fraud. The CMHC executives need to show self-sufficiency and this is not done by making good on all claims.
April 7th, 2008 at 8:58 am
No matter what they call it, I bet that mortgage applications and fraud gets a bit more attention once the market starts falling, just like it is in the states.
April 7th, 2008 at 8:45 am
There’s a simple solution to the whole debate over whether or not there’s a ’subprime’ issue here. All we have to do is refer to buyers taking 40 year mortgages with less than 20% down as ‘prime’ or even better ‘uber-prime’ and then we have no sub-prime problem here!
Doubleplusgood!
April 7th, 2008 at 8:27 am
Yeah right….there’s no subprime in Canada. Pffffttttt…….
IIRC something like 50% of “ALL” the mortgages that were granted in CALGARY in 2007 were 30-40 year amortizations and CMHC insured…..which IMHO, and I have to call it for what it really is…..were “SUBPRIME”.
Givng too much money (a 100% increae in 24 months), to someone with little or no vested interest (0-5-10% etc down), on weak terms (40 year ams) is suprime. Doesn’t matter how good or bad their credit is.
Vancouver has to be similar……..
An entire generation of 20-30 year olds is going to get slauighteredn their newly bought $400K shoebox condos are worth 20-20-40% less then their mortgages…….
April 7th, 2008 at 8:19 am
I found this from the American http://www.loanpage.com glossary:
“The term BC & D is a rating of the loan. Similar to Moody’s Rating scale for Bonds as AAA, AA, A, etc. Generally, loans termed as A paper are for borrorwers with very good credit. BC & D lenders specialty in BC & D loans. For the most part, on our web site, we refer to BC& D as “problem or troubled” credit rather than using these letters. ”
April 7th, 2008 at 8:17 am
Van Man
They’re ALWAYS focusing on sub prime as the excuse. The fact is housing is collapsing in the states (and worldwide) because it peaked. It was way out of line with fundamentals in many places, now it’s returning. This business cycle has taken place thousands of times and the ending is always the same. Gambling against that is like gambling that the sun won’t come up tomorrow.
It is an event that has been recorded thousands of times.
The outcome is ALWAYS the same.
There is no evidence to support the notion that we are significantly different this time to alter the outcome.
One definition of insanity is, “Doing the same thing over and over and expecting a different outcome.”
April 7th, 2008 at 8:17 am
I’d also like to know what this could mean:
“something similar like lender B and C. I’m not sure what he meant by that. Maybe someone here could elaborate?”